Luiz Pinto, Matthias Sigrist, Daniel Packard


Decrease SIM portfolio by 43 basis points to
come in line with S&P 500
Reallocate funds within the
Telecommunication SIM Sector
S&P 500
Sector
S&P 500
9.11%
11.94%
12.35%
14.66%
12.65%
10.09%
19.04%
3.39%
3.09%
3.68%
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrial
Information Technology
Materials
Telecommunications
Utilities
SIM Portfolio Difference
7.51%
-1.60%
12.23%
0.29%
12.80%
0.45%
6.59%
-8.07%
13.13%
0.48%
11.97%
1.88%
21.97%
2.92%
4.52%
1.13%
3.51%
0.43%
3.19%
-0.49%
3%
3%
4%
Consumer Discretionary
9%
19%
Consumer Staples
12%
Energy
12%
Financials
Health Care
Industrial
10%
Information Technology
15%
13%
Materials
Telecommunications
Utilities
SIM Portfolio
5%
4% 3%
Consumer Discretionary
8%
Consumer Staples
12%
Energy
23%
13%
12%
7%
13%
Financials
Health Care
Industrial
Information Technology
Materials




Sell AT&T (219 basis points)
Buy Verizon (117 basis points)
Increase stake in NII Holdings (59 basis
points to 200 points)
Total Sector Holdings – 317 basis points (43
basis point decrease)

Largest US-based telecom company.
◦ 2008 Revenues: $124 Billion
Two major business lines:
 Wireless: Cell Phones, data and voice services.
◦ Acquisitions of BellSouth and Cingular
◦ Limited to the Domestic Market

Wireline: Landline communication, Internet, TV,
◦ Cable and satellite internet provider
◦ IT products and IT communications to businesses
◦ TV Competitors: Time Warner, Verizon, Comcast, Directv
Wireless
 Currently experiencing high growth.
◦ Revenues: Increased 12% from 2007 to 2008
◦ Customers: Increased 9%

49% of total sales/ 78% Total Profit
Wireline
 Revenues are slightly decreasing.
◦ 1.7% from 2007 to 2008
◦ Customers shifted from Wireline to Wireless
◦ FiOS product sales increasing
Wireless

I-phone main revenue growth driver

3G Network
◦ Exclusive contract with Apple expected to run out in 2010
◦ Verizon’s Droid brings heavy competition
◦ Bad network reputation
◦ Under heavy criticism
◦ Sold Made fun of by Verizon
Wireline
 Landline
◦ According to AT&T: customers simply switch to wireless

TV and Internet
◦ Increased competition
◦ Not main focus of management



Current Stock Price: $27.10
Dividend Yield: 6.10%
Market Cap: $ 160 Billion



Beta: 0.65
Price in line w/Industry
Undervalued vs. S&P 500
Relative to Industry
P/Forward E
P/B
P/S
P/CF
High
1.0
1.4
0.9
0.9
Low
0.9
1.4
1.1
1.1
Median
1.0
1.0
1.4
1.2
Current
1.0
0.8
1.6
1.1
Relative to S&P 500
P/Trailing E
P/B
P/S
P/CF
High
1.1
1.7
2.2
0.9
Low
0.5
0.6
1.0
0.4
Median
0.8
0.8
1.4
0.6
Current
0.5
0.7
1.5
0.4

Stock Price (Nov. 25):
$27.10

Target Price Calculation:
◦ Discount Rate: 10%
◦ Terminal FCF Growth: 3%
◦ Revenue Growth: Around 2.8 - 3%

Discounted Cash Flow: $32.77
Price forward/E:
$25.43
Dividend Discount:
$23.32

Final Target Price: $30 (60% DCF, 40% P/E)


◦ Assuming a conservative outlook.
◦ Potential upside: 10.7%
Analyst: Matthias Sigrist
10/20/2009
Year
Revenue
Terminal Discount Rate =
Terminal FCF Growth =
2009E
123,008
2010E
126,452
20,203
21,497
% Growth
EBT
EBT Margin
Interest
Interest % of Sales
Taxes
Tax Rate
Net Income
2.8%
16.4%
% of Sales
Plus/(minus) Changes WC
% of Sales
Subtract Cap Ex
Capex % of sales
Free Cash Flow
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
Shares Outstanding
Diluted Shares Outstanding
17.0%
2.8%
22,049
16.5%
2013E
137,373
2.8%
22,667
16.5%
2014E
141,220
2.8%
23,301
16.5%
2015E
145,174
2.8%
23,954
16.5%
2016E
149,529
3.0%
23,925
16.0%
2017E
154,015
3.0%
24,642
16.0%
2018E
158,636
3.0%
25,382
16.0%
-
-
-
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
6,970
34.5%
13,233
7,416
34.5%
14,080
6.4%
19,661
16.0%
3,961
3.2%
$ 20,296
16.5%
16,560
% Growth
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
2.8%
$ 22,099
2012E
133,632
-
% Growth
Add Depreciation/Amort
17.0%
2011E
129,992
Normal
10.0%
3.0%
20,232
11.6
14.6
5.4
6.4
5,900
5,923
34.5%
14,475
2.8%
$ 20,799
16.0%
16.0%
162
166
0.1%
21,497
17.0%
12,978
-21.6%
93,400
99,924
193,324
10.79%
7,624
0.1%
22,099
17.0%
13,341
2.8%
48%
52%
100%
10.9
13.7
5.1
6.1
7,607
34.5%
14,442
-0.2%
21,381
16.0%
2,539
1.9%
23,386
17.5%
14,977
12.3%
7,820
34.5%
14,847
2.8%
21,980
16.0%
2,473
1.8%
24,040
17.5%
15,259
1.9%
8,039
34.5%
15,262
2.8%
22,595
16.0%
2,542
1.8%
24,713
17.5%
15,686
2.8%
8,264
34.5%
15,690
2.8%
23,228
16.0%
2,613
1.8%
25,405
17.5%
16,125
2.8%
Normal
Current Price $ 26.02
Implied equity value/share $ 32.77
Upside/(Downside) to DCF
25.9%
10.6
13.4
5.0
5.9
8,254
34.5%
15,671
-0.1%
23,925
16.0%
2,692
1.8%
26,168
17.5%
16,119
0.0%
8,502
34.5%
16,141
3.0%
24,642
16.0%
2,772
1.8%
26,953
17.5%
16,603
3.0%
8,757
34.5%
16,625
3.0%
25,382
16.0%
2,855
1.8%
27,761
17.5%
17,101
3.0%
Terminal Value
Free Cash Yield
2019E
163,395
3.0%
26,143
16.0%
0.0%
9,019
34.5%
17,124
3.0%
26,143
16.0%
2,941
1.8%
28,594
17.5%
17,614
3.0%
259,177
6.80%
Terminal P/E
15.1
Terminal EV/EBITDA
6.1
$
32.77
8.5%
9.0%
9.5%
3.0%
$
$ 37.69 $ 34.95 $ 32.58 $
$ 39.52 $ 36.46 $ 33.84 $
$ 41.69 $ 38.22 $ 35.28 $
3.5%
$ 44.30 $ 40.30 $ 36.98
1.5%
2.0%
2.5%
4.0%
4.5%
$ 36.11 $ 33.64 $ 31.48
10.0%
29.57
30.51
31.56
32.77
$
$
$
$
$ 34.16 $
$ 47.48 $ 42.80 $ 38.97 $ 35.78 $
$ 51.46 $ 45.86 $ 41.37 $ 37.70 $
10.5%
27.88
28.68
29.57
30.58
$
$
$
$
31.74 $
33.08 $
34.64 $
11.0%
26.37
27.05
27.82
28.67
$
$
$
$
11.5%
25.01
25.60
26.26
26.99
29.65 $
30.76 $
32.04 $
27.81
28.75
29.81

Second largest US-based telecom company.
◦ 2008 Revenues: $98 Billion
Two major business lines:
 Wireless: Cell Phones, data and voice services.
◦ Joint Venture with British operator, Vodafone
◦ Limited to the Domestic Market

Wireline/Business: Recently merged.
◦ Cable Internet provider
◦ IT products and IT communications to businesses
◦ Recently expanded to the International Market
Wireless
 Currently experiencing high growth.
◦ Revenues: Increased 12% from 2007 to 2008
◦ Customers: Increased 9%

49% of total sales/ 78% Total Profit
Wireline
 Revenues are slightly decreasing.
◦ 1.7% from 2007 to 2008
◦ Customers shifted from Wireline to Wireless
◦ FiOS product sales increasing
Wireless
 4G Technology

Motorola Droid
◦ Recently launched. Competitor to AT&T’s iPhone
◦ Sold 100,000 units in the first weekend
◦ Expected to have a positive impact on earnings
Wireline

Fios Technology
◦ Fiber optic communications network, with TV, cable, and phone
◦ Launched in 2007, is now being expanded all across the country

International Operations
◦ Recently started with the acquisition of MCI
◦ High capacity for growth
◦ Focused on Business Customers



Current Stock Price: $31.78
Dividend Yield: 6.20%
Market Cap: $ 90.20 Billion
Relative to
Industry



Beta: 0.65
Price in line w/Industry
Undervalued vs. S&P 500
High
Low
Median
Current
P/Trailing E
1.2
.71
.90
1.1
P/Forward E
1.2
.71
.91
.99
P/B
2.4
.7
1.3
1.1
P/S
1.2
.6
.9
.8
P/CF
1.1
.7
.9
.9

Stock Price on 10/1: $28.80
Current Stock Price: $31.78

Target Price Calculation:

◦ Discount Rate: 10%
◦ Terminal FCF Growth: 4%
◦ Revenue Growth: Around 3.5%

Discounted Cash Flow: $35.78
Multiples: From $36 to $42

Final Target Price: $36

◦ Assuming a conservative outlook.
◦ Potential upside: 13%
Analyst: Luiz Pinto
10/20/2010
Year
Revenue
Terminal Discount Rate =
Terminal FCF Growth =
2009E
103,970
% Growth
EBT
EBT Margin
Interest
Interest % of Sales
Taxes
Tax Rate
Net Income
% of Sales
Plus/(minus) Changes WC
% of Sales
Subtract Cap Ex
Capex % of sales
Free Cash Flow
107,260
3.2%
10,433
10.0%
10,975
10.2%
2011E
110,586
3.1%
11,525
10.4%
3.2%
12,097
10.6%
118,119
3.5%
12,757
10.8%
2014E
122,253
3.5%
13,448
11.0%
2015E
126,532
2016E
130,961
3.5%
13,919
3.5%
14,406
11.0%
11.0%
2017E
135,544
3.5%
14,910
11.0%
2018E
140,966
4.0%
15,506
11.0%
2019E
146,605
4.0%
16,126
11.0%
-
-
-
-
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
3,547
34.0%
6,886
3,732
34.0%
7,244
5.2%
15,596
15.0%
2,469
2.4%
17,400
16.7%
7,550
16,089
3,918
34.0%
7,606
5.0%
16,588
15.0%
15.0%
79
80
0.1%
0.1%
17,500
16.0%
5,911
-21.7%
17,694
16.0%
6,580
11.3%
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
Normal
45,373
56,432
101,805
9.21%
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
Normal
Aggressive Conservative
11.9
11.9
11.9
14.8
15.9
13.8
3.3
3.3
3.3
4.1
4.4
3.8
Current Price
Implied equity value/share
Upside/(Downside) to DCF
114,125
2013E
0.0%
% Growth
Shares Outstanding
2012E
-
% Growth
Add Depreciation/Amort
2010E
Normal Aggressive Conservative
10.0%
9.0%
11.0%
4.0%
5.0%
3.0%
45%
55%
100%
Aggressive
47,489
61,828
109,317
2845
Normal
Aggressive Conservative
$
28.80 $
28.80 $
28.80
$
35.78 $
38.42 $
33.37
24.2%
33.4%
15.9%
4,113
34.0%
7,984
5.0%
17,119
15.0%
1,027
0.9%
18,260
16.0%
7,870
19.6%
4,337
34.0%
8,420
5.5%
17,245
4,572
34.0%
8,876
5.4%
17,849
4,732
4,898
34.0%
9,186
34.0%
9,508
3.5%
17,714
3.5%
18,334
5,069
34.0%
9,841
3.5%
18,976
5,272
34.0%
10,234
4.0%
19,735
5,483
34.0%
10,643
4.0%
20,525
14.6%
14.6%
14.0%
14.0%
14.0%
14.0%
14.0%
945
978
633
655
678
705
733
0.8%
18,899
16.0%
7,711
-2.0%
Conservative
43% 43,398
57% 51,549
100% 94,947
0.8%
19,560
16.0%
8,142
5.6%
43%
57%
100%
0.5%
20,245
0.5%
20,954
16.0%
7,288
16.0%
7,543
-10.5%
3.5%
Terminal Value
Free Cash Yield
0.5%
21,687
16.0%
7,807
3.5%
0.5%
22,555
16.0%
8,120
4.0%
0.5%
23,457
16.0%
8,444
4.0%
Normal Aggressive Conservative
146370
221666
108722
5.77%
3.81%
7.77%
Terminal P/E
13.8
20.8
10.2
Terminal EV/EBITDA
4.1
6.2
3.1
Free Cash Flow Growth
VZ
Terminal Discount Rate
$ 35.78
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
3.0%
$ 38.22
$
35.29
$
32.79
$ 30.61
$
28.71
$
27.03
$ 25.54
3.5%
$ 40.29
$
36.97
$
34.17
$ 31.77
$
29.68
$
27.85
$ 26.24
4.0%
$ 42.77
$
38.96
$
35.78
$ 33.09
$
30.78
$
28.78
$ 27.03
4.5%
$ 45.81
$
41.35
$
37.69
$ 34.64
$
32.06
$
29.84
$ 27.92
5.0%
$ 49.60
$
44.26
$
39.98
$ 36.47
$
33.55
$
31.07
$ 28.94
5.5%
$ 54.48
$
47.90
$
42.78
$ 38.67
$
35.31
$
32.50
$ 30.12
6.0%
$ 60.99
$
52.59
$
46.27
$ 41.36
$
37.42
$
34.19
$ 31.49
6.5%
$ 70.10
$
58.83
$
50.77
$ 44.71
$
39.99
$
36.21
$ 33.11
Comaprison
Current Ratio
Debt to Equity Ratio
Average Collection Period
Times Interest Coverage
EPS
Dividend/Share
Working Capital
CF operation
Net Cash Flow
CF Operation/Share
Net CF/Share
Cash/Share
AT&T
0.5
1.8
47
6.9
$ 2.17
$ 1.61
$ (19,734)
$ 33,656
$ (178)
$ 5.68
$ (0.03)
$ 0.30
Verizon
1.0
1.6
44
6.1
$ 2.23
$ 1.78
$
169
$ 26,620
$ 8,629
$ 9.34
$ 3.03
$ 3.43

Latin American Wireless Company
◦ 2008 Revenues: $4.2 Billion
Offers four types of services:
 Nextel Direct Connect
 Wireless Data Solutions and Mobile Internet Access
 Handsets
Revenue By Region
 International Roaming Services
0%
13%
6%
Nextel Mexico
50%
Nextel Brazil
Nextel Argentina
31%
Nextel Peru
Corporate and other
Core Earnings By Region
3%
-12%
Nextel Mexico
11%
50%
Nextel Brazil
Nextel Argentina
24%
Nextel Peru
Corporate and other
Performance Drivers
ARPU
CPGA
Churn Rate (%)
FX Rate Fluctuation
Operating Revenues
Operating Income
ARPU
2009
2008
46
59
268
318
1.93
1.87
Actual
Normalized
-3.0%
17.0%
-9.0%
30.0%
-22.0%
-5.0%
Ratios
Profitability
ROA
ROIC
Liquidity
Current Ratio
Leverage
Debt To Assets
Debt To Equity
Allowance to AR
2008
2007
2006
2005
2004
7.25%
8.63%
6.96%
8.08%
8.93%
10.79%
6.67%
8.20%
3.78%
5.02%
2.69
3.17
2.12
2.62
1.69
0.65
1.85
0.60
1.51
0.59
1.45
0.69
2.23
0.72
2.53
5.78%
4.41%
5.07%
5.03%
4.82%
RATIO
Earning Power
Asset Turnover
Pretax ROE
Pretax ROA
Liquidity
Quick Ratio
Current Ratio
Avg Days Collect
Inventory Turnover
Times Interest Earned
Margins
Gross Margin
Operating Margin
Earnings After Taxes
NIHD
2008
0.81
26.5%
10.0%
AMX
2008
0.79
52.6%
18.3%
TI
2008
0.34
10.9%
3.3%
MICC AVERAGE
2008
2008
0.71
0.6625
39.9%
32.5%
12.3%
11.0%
2.19
2.69
38
12.1
4.2
0.51
0.77
55
4.6
9.9
0.78
0.8
103
36.6
1.5
0.55
0.78
30
12.7
5
1.0075
1.26
56.5
16.5
5.15
60.5%
18.0%
8.6%
57.8%
27.6%
17.2%
54.0%
14.8%
7.4%
78.3%
25.4%
9.2%
62.7%
21.5%
10.6%
500
400
300
NIHD
200
TI
100
AMX
MICC
0
-100
-200
Wireless
 Spectrum Acquisition
 3G Network
 Economic Upturn
 Reduced cost per customer



Current Stock Price: $30.95
Dividend Yield: N/A
Market Cap: $ 4.8 Billion
Valuation Measure
P/Trailing E
P/Forward E
P/B
P/S
P/CF
Sector
-33%
-11%
-19%
-33%
-36%



Beta: 2.23
Industry Undervalue
Undervalued vs. S&P 500
S&P
Wireless Integrated NIHD
500
-33%
209%
-34%
-28%
-16%
NM
-18%
-58%
14%
-33%
-22%
-71%
-18%
-59%
-33%
-64%
-20%
-60%
-29%
-55%

Stock Price (Nov. 23): $30.95

Target Price Calculation:
◦ Discount Rate: 10.5%
◦ Terminal FCF Growth: 5%
◦ Revenue Growth: Around 4.5 to 5%

Discounted Cash Flow:
Price forward/E:
$41.67
$41.67

Final Target Price: $41.67
(100% DCF)

◦ Assuming a conservative outlook.
◦ Potential upside: 34.6%
Absolute Valuation
P/Forward E
P/S
P/B
P/EBITDA
P/CF
High
34.3
109.6
16.9
213.98
36.5
Low
6.7
0.5
1.2
1.48
2.8
Median
19.2
3.8
8
13.42
15.1
Current
13.8
1.6
2.3
4.84
6.8
Target
Multiple
18.2
2.2
3.8
8.1
11.2
Target
Value
$2.29
$25.76
$14.10
$6.70
$4.77
Target
Price
41.67
56.67
53.58
54.27
53.42
NII Holdings Inc.
Analyst: Daniel Packard
11/23/2009
Terminal Discount Rate =
Terminal FCF Growth =
Year
2009E
Revenue
4,302,000
% Growth
542,394
EBT Margin
12.6%
Interest
Interest % of Sales
Taxes
5,573,000
11.0%
607,625
703,198
12.1%
12.6%
% of Sales
12.1%
6.5%
972,448
12.1%
8,518,968
6.0%
1,030,795
12.1%
8,944,917
5.0%
1,082,335
12.1%
9,392,163
5.0%
1,136,452
12.1%
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
176,211
203,927
29.0%
29.0%
431,414
499,271
15.7%
456,911
512,716
213,157
29.0%
521,866
4.5%
516,338
230,209
29.0%
563,616
8.0%
557,646
247,475
29.0%
605,887
7.5%
599,469
264,798
29.0%
648,299
7.0%
641,432
282,010
29.0%
690,438
6.5%
642,941
298,931
29.0%
731,865
6.0%
681,517
313,877
29.0%
768,458
5.0%
715,593
329,571
29.0%
806,881
5.0%
751,373
8.9%
9.1%
9.2%
8.5%
8.5%
8.5%
8.5%
8.0%
8.0%
8.0%
8.0%
(52,263)
(89,875)
(57,854)
(30,373)
(19,682)
(21,158)
(22,639)
(24,110)
(25,557)
(26,835)
(28,176)
-1.8%
-1.0%
1,054,410
1,003,140
20.0%
21.0%
18.0%
(147,397)
(255,960)
(49,007)
73.7%
-80.9%
2009E
13.5
18.2
7.8
9.7
-0.5%
911,186
15.0%
96,646
-297.2%
Debt
2011E Cash
10.3 Cash/share
13.9
5.9
7.4
2010E
12.0
16.1
6.8
8.5
166,927.0
166,927.0
166,927.0
Normal
Aggressive Conservative
$
30.95 $
30.95 $
30.95
$
913,097
8,036,763
0.0%
Normal
Aggressive Conservative
1,478,918
1,537,294
1,422,889
5,477,424
7,038,589
4,409,057
6,956,342
8,575,883
5,831,945
-2.85%
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
12.1%
7.0%
-
% Growth
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
853,362
7,546,256
2019E
0.0%
-1.2%
Free Cash Flow
12.1%
7.5%
2018E
-
860,400
Capex % of sales
793,825
7,052,576
2017E
0.0%
382,878
Subtract Cap Ex
12.1%
8.0%
2016E
-
12.8%
Plus/(minus) Changes WC
735,023
6,560,536
2015E
0.0%
382,388
% of Sales
9.0%
2014E
-
% Growth
Add Depreciation/Amort
6,074,570
2013E
0.0%
29.5%
Net Income
Implied equity value/share
Upside/(Downside) to DCF
5,021,000
2012E
-
160,006
Tax Rate
Current Price
2011E
16.7%
EBT
Shares Outstanding
2010E
Normal
Aggressive Conservative
10.5%
10.0%
11.0%
5.0%
5.5%
4.5%
41.67
34.6%
$ 51.38
66.0%
$
34.94
12.9%
-0.3%
984,080
15.0%
117,499
21.6%
Normal
21%
79%
100%
3,301,233
1,243,251
7.45
-0.3%
916,835
13.0%
267,363
127.5%
-0.3%
830,088
11.0%
437,004
63.4%
Terminal Value
Free Cash Yield
-0.3%
723,309
9.0%
585,960
34.1%
Normal
14,866,171
-0.3%
681,517
8.0%
706,308
20.5%
Aggressive
18,256,288
-0.3%
715,593
8.0%
741,623
5.0%
Conservative
12,519,168
5.24%
4.27%
6.22%
Terminal P/E
18.4
22.6
15.5
Terminal EV/EBITDA
9.0
10.8
7.7
-0.3%
751,373
8.0%
778,704
5.0%
$
41.67
4.0% $
4.5% $
5.0% $
5.5% $
6.0% $
9.0%
50.94 $
55.71 $
9.5%
45.17 $
48.92 $
10.0%
40.38 $
43.38 $
10.5%
36.36 $
38.80 $
61.68
69.35
79.58
53.50
59.22
66.58
46.98
51.38
56.87
$
41.67 $
$
$
$
$
$
$
$
$
45.13
49.35
$
$
11.0%
32.93 $
34.94 $
11.5%
29.98 $
31.65 $
12.0%
27.42
28.82
37.28
40.04
43.35
33.57
35.82
38.47
30.42
32.27
34.43
$
$
$
$
$
$
Below is a brief summary of NII Holdings BUY rating:
◦ NII’s discounted cash flows and valuation analysis - 34%
undervalued.
◦ NII’s return on assets and sustained capital expenditures despite
economic slowdown.
◦ Acquire additional telecom spectrum in selective emerging
markets.
◦ NII has successfully differentiated themselves.
◦ NII’s cyclical nature indicates growth as domestic and
international economic conditions improve.
Risks related to this recommendation include:
◦ Reduced demand for services resulting from economic downturn
causing reduced discretionary spending.
◦ Increased levels of competition among the other wireless
providers.
◦ Increased levels of voluntary and involuntary customer turnover.
◦ Available spectrum limitations and government regulation.
Below is a summary of Verizon Communications BUY rating:
◦ According to the DCF and the multiples valuation, there is a
conservative upside of 13%. Might be higher.
◦ High growth in the wireless sector, with the highest level of
network coverage in the country.
◦ Now has a comparable product to the iPhone, the Droid, expected
to boost sales.
◦ Has a chance of leading in new 4G technology, increasing its
value.
◦ Has recently expanded to international markets, reducing its
exposure to the American market.
Risks related to this recommendation include:
◦ Shrinking Wireline segment might affect the long-term
profitability of the company.
◦ Droid sales can hurt stock price, if below expectations.
◦ Capital intensive nature. Demands a huge continuous investment.




Sell AT&T (219 basis points)
Buy Verizon (117 basis points)
Increase stake in NII Holdings (59 basis
points to 200 points)
Total Sector Holdings – 317 basis points (42
basis point decrease)